Gold/Silver Technical Highlights:

See what drivers DailyFX analysts expect to move Gold in the coming weeks in the Gold Forecast.

Gold trading into resistance, watch how it reacts

Since getting smacked down off last month’s high, gold remains at risk of continuing lower, which is why the current rally remains viewed as only a bounce and not the beginning of another leg higher. This view could of course be wrong which is why as levels get tested paying attention to price action can be quite helpful.

Yesterday, gold snuck above the upper parallel belonging to a channel dating back to the summer, but not in a strongly convincing manner. Adding further weight on gold is the fact it is trading at steady price resistance just over 1300. How it reacts here could be defining for those looking to initiate fresh shorts.

A convincing turn down here may offer up a reason to sell and provide a backstop (stops placed above resistance). The thinking remains that another leg lower will develop, with the lower parallel of the channel, currently in the 1250s, at some point down the line.

A breakout above resistance will force a neutral view at the least, if not bullish if the aforementioned resistance levels turn into sources of support. More on that later should this become the case…

Check out the IG Client Sentiment page to see how changes in trader positioning can help signal the next price move in gold and other major markets.

Gold Daily Chart (Trading at resistance)

Silver has been stronger, but same technical headwinds

Silver has been stronger recently, a fairly uncommon occurrence between the two major precious metals. This has gold turned into the preferred short for now, but silver obviously has similar headwinds as gold. The Feb 14 low could turn the current bounce lower, bringing trend-line support from November and the top of a range from last year into play.

Furthermore, a complex two-headed head-and-shoulders pattern could be developing, with the current bounce acting as the right shoulder of the pattern. Of course, we will need to see it turn down and eventually break the neckline located around the aforementioned support levels before calling it a valid H&S formation, but certainly a possibility worthy of keeping on the backburner…